CASE STUDIES OF LEAN MANUFACTURING PROGRAMS AND PROJECTS

IV

Part IV shows how six different companies deployed lean manufacturing within their facilities (the names and places have been changed to protect competitive condentiality). Each case addresses a different level or aspect of a lean implementation, but they all follow the same outline in regard to company background, drivers for change, the approach utilized, benets achieved, and lessons learned. In addition, there are testimonials at the end of each case that provide the reader with some insight into the perceptions of employees experiencing this changeover to a lean environment.

Copyright 2001 William M. Feld

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Case Study A: Operations Redesign Program

Company Prole

ocated in an industrial park within the city of Juarez, Mexico, resides a manufacturer of uninterrupted power supplies (UPS) for computers. This manufacturer was part of the maquiiadora system utilized by many multinational companies as a source of low-cost labor for products. This particular facility was one of many sites owned and operated by a company called Unity Electronics. This primary manufacturing location was contained within a 90,000-square-foot facility, with a total employee population of about 850. Their key manufacturing processes included the automated and manual insertion of printed circuit boards (PCBs) and wave solder operations, as well as manual and automated assembly. Unity Electronics marketed, designed, manufactured, and delivered UPS systems to the computer and communications industry worldwide. The Unity Electronics operation was divided into several different divisions. The division that owned this particular manufacturing site was Silver Systems Group (SSG). SSG generated approximately $250 million in revenues during 1998 by focusing on three major product segments standby, line interactive, and online units. The Juarez, Mexico, operation was accountable for producing approximately one half of SSGs revenue. The overall operation was divided among three facilities located in Juarez, Mexico; Horton Mesa, TX; and El Paso, TX.
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The original facility was built when the initial company, Faucet, was in the low-volume UPS business. Over time, the need arose to expand into an adjacent building to support a growing demand for higher and higher production volumes. The resulting impact was an ineffective factory ow and insufcient dock space to handle high-volume UPS production. Capacity constraints on equipment limited the ability to satisfy customer delivery requirements and provide on-time shipments. The factory had to operate 24 hours a day, 6 to 7 days a week, to meet customer requirements which did not allow any time for recovery or makeup plans should there be line stoppages. Key customers were also requiring additional capacity and exibility, which could not be met. To remove some of the constraints, PCB assemblies were outsourced and plans were made to transfer production to other, higher cost facilities within the group. Automated insertion (AI) equipment was running around the clock to keep up with production, which allowed for only minimum scheduled maintenance. Aside from the factory, there was a 30,000-square-foot warehouse facility in Horton Mesa, TX, which handled all inbound and outbound material shipments. In addition, there was a peripheral 13,000-square-foot material staging warehouse in Juarez to handle the overow of materials due to the ineffective ow through the plant.

Drivers for Change

The operational performance of this manufacturing site had not been satisfactory for several end-item customers over a 3- to 9-month period of time. In November 1997, Unity Electronics was purchased from Faucet and internal management consultants from the new parent company were sent to visit the site to conduct an operations diagnostic on the El Paso, Horton, and Juarez facilities. The result of this diagnostic indicated several issues: 1. Unity desperately needed to get control of its demand management process. 2. The company had a serious delivery performance problem (35% ontime to customer requested ship date). 3. Inventory turns were around 2.8. 4. Supplier management and development were really nonexistent. 5. The limited ownership for product performance was scattered throughout the organization.

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6. The planning and control of material and information ow were handled through two different MRP systems. In addition, several informal business rules were used to manage work prioritization on the shop oor. 7. A limited number of shopoor metrics focused only on quality. 8. Many informal xes were put in place without institutionalizing the improvements. In addition, Intermax, a primary OEM worth approximately 50% of Unitys business, had recently come in and rated the quality system of Unity Electronics as very poor one of our worst suppliers. With these identied drivers for change, it is not difcult to see what motivated Unity Electronics to pursue a new way of doing business.

Project Background
Based on the above ndings, an initial improvement effort was launched in December 1998 and focused on supply-chain management. By February 1999, it became increasingly obvious that signicant synergies could be gained for the business if several ongoing initiatives could be combined under one program. By April 1999, an operations redesign program (focusing on lean manufacturing principles) was launched which combined a supply-chain management project, a strategic procurement project, and a plant expansion project into one overall program. The Unity Electronics Unity Operations Redesign (UOR) program was ofcially kicked off by selecting a multi-disciplined team to focus on redesigning the value stream for the entire operations process. This team focused on two main tasks: (1) developing an overall conceptual design for the new operation, and (2) generating a project implementation plan that signicantly improved the companys ability to satisfy all external customer and internal business expectations. Throughout the project, the project team received signicant training in both change management methodologies and lean manufacturing techniques for operations management. In addition to concentrating on the longer term perspective, short-term actions (or quick hits) were identied, and improvements were incorporated as quickly as possible during the concept design phase.

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Project Scope and Objective

Unity Electronics UOR program addressed the entire operations process from customer forecast and demand management through factory oor management and scheduling to supplier management and the distribution of nished goods. It included their global strategic procurement initiative and took advantage of the opportunity to set up a greeneld operation within a brand-new facility based on a business unit approach. The primary performance objectives were intended to affect: Customer requested ship date (CRSD), the companys performance measured against the date rst requested by the customer when an order is placed. This is a measure of the entire process of forecasting, nished goods/service level strategy, and engineering and factory performance. Customer promise date deviation, the companys performance measured against the rst promise given to a customer when an order is placed. The promise date may not equal the CRSD. Manufacturing delivery, a measure of the ability of the factory to build and ship product on its scheduled date. Manufacturing lead-time, the length of time from procurement of raw materials to completion of nished goods; also, the minimum length of time from customer order to delivery of requested product. Supplier performance, a measure of a suppliers ability to satisfy delivery, quality, service, and cost expectations. Inventory levels and turns (raw materials, work in process, and nished goods), the annual cost of sales (past 3 months annualized) divided by month-end inventory levels.

Project Approach
As was stated earlier, the overall approach to the UOR program actually evolved over time. The project initially began with a focus on the Unity Electronics supply chain, from the customer to manufacturing planning and control on the shop oor to the delivery of nished goods to the customer through warehouse distribution. After a few months of working on the project, it was determined that a greater amount of leverage and subsequent benet could be achieved through the synergy of several projects, so the entire

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project was broadened to cover all of operations and placed under one program management structure. This new scope covered everything from order administration and supplier interface to manufacturing management and customer interface. The overall program was split into several individual projects, which were all interconnected via a common purpose through specically identied objectives. The projects were segregated by major business process to provide focus for the individual teams and their assigned objectives. Each project had an identied leader with assigned team members. The projects were time phased so that the team members who were assigned to initial projects could be reassigned to later projects. By assigning resources in this manner, Unity was able to achieve cross-functional knowledge transfer through exposure across project teams. The individual projects included: 1. Process layout: Aspects dealing with the physical ow, cell design, and nal layout for each of the cells (12) and business units (4). 2. Material planning and control: Focus on the design and development of the logistics process for planning and controlling the ow of material through the factory and warehouse system to the customer through Kanban pull. 3. Organization design: Organization redesign and training programs that included the cell team, cell leaders, business unit managers, and support operations through a structured process of assessment and selection. 4. Facilities (the new plant): Construction of a brand-new manufacturing facility. 5. Tactical procurement: Deployment of shared EDI with suppliers through EDI/e-commerce, and reduction of the current supply base by 40%. 6. Total acquisition cost: Generation of a global supply strategy and supplier development and selection process. Each project had its own subset of objectives and assigned deliverables, and each team had to report progress to plan for their project every week. Integration between the project team leaders in regard to what they were designing for the new processes was essential; therefore, communication between teams was a constant activity.

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Even though each project was managed independently, they all had to follow the same methodology for design, development, and implementation. This methodology had seven distinctly independent steps: 1. Baseline would establish a baseline of current performance for the existing processes. This was accomplished by mapping each of the critical operational processes and gathering key performance data on each of those processes. 2. Desired state would establish the desired state for the business. The team did this by reviewing the operations diagnostic that was conducted in December of 1997. They also performed a self-assessment on key business processes to determine where Unity Electronics was performing compared to what was considered best practice. They made site visits to other companies who were noted for operating with lean practices. The expected outcome of this step was for the project team to recognize what was possible and to learn from the techniques of others. 3. Gap analysis would recognize the gap between where they were and where they wanted to be. An analysis was performed to understand the gap and identify actions to close it. 4. Concept design would provide a high-level concept view of the desired state for Unity Electronics, or a future state vision for what the project team collectively agreed they wanted success to look like. It included deliverables such as block layouts, determining the number of cells, what products are made in the cells, number of business units, etc. 5. Detailed design would provide a detailed view of the future state. It described all those elements that make the future state a reality and included deliverables such as cell equipment requirements, equipment loads, Kanban sizes, stafng needs, operating rules, material planning and control process at the cell level, cell team member roles and responsibilities, etc. 6. Implementation plan would develop an implementation plan and include the time frame, identied deliverables, assigned ownership, transition strategy, and sequence of events to make the future state a reality. 7. Execution actually would deploy the implementation plan.

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As each individual projects team analyzed and designed their improvements, they were required to receive approval at each step before moving on to subsequent steps. This ensured control of the program. It kept the steering committee engaged in the project and made sure that they bought into the design solutions before going too far with an unapproved design. It also enhanced integration between the projects because the steering committee was made up of cross-functional managers covering all aspects of the business. Therefore, they were the objective third-party view that looked at the solutions from an outside perspective. When it came time for implementation, the process owners (those who had to live with the new process after the project was over) were in the drivers seat for deployment. The design team was to still remain assigned to the project until the process owner agreed the new process worked and was doing what it was designed to do. The one overriding strategy was to prove out the mechanics of the new process in the old facility. When the new operational process for the rst business unit was stable, then it would relocate to the new facility, thereby minimizing risk and avoiding a double move of equipment. Execution of the implementation plan had a few key aspects worth noting: 1. The responsibility for execution was handed over to the individuals who had ownership for the new process after implementation, thereby requiring buy-in to the new design before deployment. This reduced the burden of having to sell the new design to those on the shop oor. 2. A pilot cell approach was used, by which the implementation initially concentrated on one manufacturing cell, gathered all the lessons learned from that cell, and then carried those onto the next manufacturing cell. This minimized risk to the project and allowed the project teams to collectively concentrate their energies on one pilot cell during the learning stages of implementation. 3. Business units were deployed one by one in accordance with the manufacturing cells they supported. This allowed: (1) the organization changes to take place based around a specic product family, and (2) ownership for all the operational processes that affected that family to be quickly adopted. This in turn accelerated the arrival of benets at the bottom line for that given product family.

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Project Time Line

Date Milestone

December 1997 February 1998 March 1998 June 1998 July 1998 August 1998 September 1998 October 1998 November 1998 December 1998 January 1999 April 1999

Supply chain project launched UOR program detail specication UOR project team mobilized Material planning/control design approved Pilot cell detail design approved Current baseline process completed Pilot business unit design approved Global supply chain strategy approved First cell goes live First cell exit criteria satised First business unit goes live New plant comes on line

Techniques Utilized
Workshop Training Topics Addressed

Program and project management

Change management Lean manufacturing (Five Primary Elements)

Business process redesign Process value analysis

Charter, milestone plan, hazards, issue log, protocol, project organization, project le, risk assessment, detail schedule, deliverables, control mechanisms Communication planning, reaction to change, resistors One-piece ow, standard work, workable work, percent loading chart, forward plan, crosstraining, runner, repeater, stranger, takt time, Kanban, ABC material management, 5S housekeeping, pull scheduling, visual control, roles and responsibilities, operating rules, shopoor metrics, service cell agreements, mix-model manufacturing, P/Q analysis, project-focused management, continuous improvement, routing analysis Baseline performance, gap analysis, future state, concept design, detail design, implementation planning, transition strategy Supplier-input-process-output-customer mapping (SIPOC)

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Benets Achieved
Delivery Performance (CRSD) 4/98 (Pre-UOR) (%) As of 2/99 (%) Target (%)

Runner products Repeater products Stranger products Manufacturing Lead-Time

48 46 41
4/98 (Pre-UOR) (hours)

98 97 90
As of 2/99 (hours)

99 97 90
Target (hours)

Runner products Repeater products Stranger products

21 30 50
4/98 (Pre-UOR) (%)

16 20 23
As of 2/99 (%)

11 15 25
Target (%)

Productivity

67
4/98 (Pre-UOR) (days)

77
As of 2/99 (days)

84
Target (days)

Inventory

180

106

60

Lessons Learned
Adhere to and constantly monitor meeting times and project deliverables. If a deliverable is going to be missed, immediately address the issue and develop a recovery game plan. In this particular case, it should be noted that the Mexican culture was not attuned to exact time frames and specic scheduled commitments. Do not assume a group understands terms being used; rather, verify that they do understand the terms being used. (Communication! Communication! Communication!) Several terms such as team and Kanban were new to this culture. Drive to detail as early as possible in the project to assure knowledge transfer. If the project team can develop the detail schedule, with the appropriate deliverables, in the correct sequence, they are demonstrating understanding. This pre-planning is critical when it comes time to involve other resources outside the project team (e.g., process owners, specialists) for scheduling meetings, verifying information, and discussing design options.

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Utilize project leader integration meetings to ensure that cross-functional team issues are being addressed and communicated. Depending on the project, this should take place at a minimum of once per week. This aspect is critical when multiple initiatives are being undertaken simultaneously. Develop and roll out the communication plan early in the process to avoid excessive rumors and speculation. Employees need to be informed that a new project is underway, why it is being done, and how they are being affected. Recognize individual capabilities and limitations when assigning project roles. Do not overestimate the abilities of individuals based on their enthusiasm for the project. Verify that they have been allocated the time for their activities and have the expertise to do the job. Make sure project protocols and project les are utilized religiously throughout the project life cycle. The project le is the bible for the project. It contains the project status, issues, game plan, and evidence of progress. At the end of the project, it provides a guideline for the next team that has to implement a similar initiative. Document project roles and responsibilities early in the project. Make it very clear who has ownership for what at the very beginning of the project. Leave no gray areas or extensive overlap of accountabilities. This will save a lot of headaches later in the project. Utilize Belbin proles for insight whenever possible. Meredith Belbins team role proles provide valuable insight about the makeup of a team and the probability of success. Take advantage of this insight whenever possible. Require full-time team members during the design and analysis phase. Part-time teams will only be able to give part-time results. When a project team has only 20% of its team members time, it is very difcult to maintain team continuity and focus over the life of the project. Enlist process owner buy-in to the new redesigned processes. Process owners should be given responsibility, accountability, and authority (RAA) for implementation whenever possible. They will own the process after the project is complete and therefore must agree with the new design. They must accept ownership for the design; therefore, they should be intimate with its deployment. Coordinate rollout of the project with top management approval. Top management has ultimate responsibility for what happens at the plant and therefore should approve major changes to the business process that are under their control.

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Train all employees who will be involved in the project, not just the design team. Process owners need to know how the project is being managed, where they t in, and the overall direction and philosophy relative to lean management.

Testimonials
From the rst diagnostic to the end of the project, it was the steady pressure, honesty, and professionalism of all the teams that delivered success. The constant feedback really helped keep us on the right path. Vice President, Operations By reorganizing the entire Mexico Operations organization into cell manufacturing based business units, we expect to see the following measurable results: 1. Productivity improvements: reduced direct head-count requirements, extensive training programs and CIP programs. 2. Increased manufacturing exibility, the nature of cell manufacturing; we will also be heavily cross-trained at the cell and support team member levels. 3. Management by objective: virtually every department in the facility has been tasked to develop performance metrics by which to assess their performance, including the business units. 4. Reduction in the cost of quality: we have implemented progressive inspection throughput the plant, reducing the number of inspectors. 5. Improved health and safety: the focus on cell ownership along with 5S training will improve the shop organization as well as plant cleanliness. 6. To move from being one of Intermaxs lowest rated suppliers to one of the best in less than one year. Director Plant Operations Taking a signicant step forward in the program/project management process accomplished a number of positive initiatives: 1. Claried the roles and responsibilities of the management, teams, and participants.

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2. Set forth a standard set of operating rules for all the teams to follow. 3. Provided a message to all of management that the standard processes will be embraced. 4. Provided a team structure that affords accountability for its members and leadership. Program Manager Unity made signicant improvements in their overall quality and manufacturing process. The score of 76 on this new survey, as compared to survey scores of 65 in April 1998 and 53 in December 1997, is one of the best scores in the shortest period of time among Intermax suppliers. Intermax Quality System Auditor

Copyright 2001 William M. Feld